Good morning, I am here to give you a quick overview on what business markets are about. Major industries making up this market are agriculture, forestry, fisheries, mining, manufacturing, construction, transportation, communication, utilities, finance, insurance, services…
Business markets are a lot larger than consumer marketsSuppliers are expected to customize offerings to business customer needs due to smaller customer base and power of large customers Purchasing is done by trained agents.Multiple buying influences –technical experts and senior managementMult. Sales calls as well
Demand is derived from demand for consumer goods; they can’t simulate demand but fight to maintain share of demandDemand is not affected by price changes, is inelastic in the short run because producers cannot make quick changes to production methodsDemand is more volatile. A given % increase in consumer demand can lead to a larger increase in business demand50% of US business buyers are in 7 states: CA, NY, PA, IL, OH, NJ, MIDirect purchasing from manufactures especially for complex items like mainframes or aircrafts
Straight: Purchasing dept reorders supplies on a routine basis and chooses from suppliers on an approved list Out-suppliers may try to come up with something new or exploit dissatisfaction to get a small order to begin withModified: Addtl. Participants on both sides due to modifications in ordersNew task. First time order. Greater the cost or risk more the number of people involved. Over time they become straight or modifiedMarketers like this: mass media can be important at the initial awareness stage, salespeople at the interest stage and technical sources during evaluations.
Businesses prefer total soln to a problem from one sellerGovt. purchase of weapons and communication systemsBids from primary contractors and then bidding out and assembling subcomponents for to second-tier contractorse.g. Shell Oil manages inventory of of oil for many business customers and knows when to replenish.Usefull due to steady demand and less paperwork.
Indonesian govt. bids to set a cement factory near Jakarta. U.S company proposed to do above on l.h.s. Japanese firm proposed all that + hiring and training of workers, using cement t build roads and new bldgs in Jakarta. They took the broad view and won the contract.
These form the decision making unitGatekeepers ( purchasers, receptionists) can prevent salespersons from contractions users or deciders
Buying center has several participants with differing interests, authority, status and diff. decision criteria.Motivations are different depending on the group.Industrial buying decisions are rational and emotional and serve both organisations needs and individuals needsImportant to have a global brand name or align independent brands under a global brand architecture , strengthening the corporate band
Organization and Administration: Strategic, technical, team-oriented, more responsibility(1) When company realises a problem or need can be met by getting a good or service. Stimuli can be internal or exteral(2) For std items it can be simple . For complex items many are involved. For technical specifications a products value analysis approach is used to reduce costs and meet standards.
Online buying offers great advantages: reduced transaction costs, delivery time, forges direct relationships.Eprocurement allows for aggregated purchasing, larger centrally negotiated volume discounts smaller purchasing staff and less buying of substandard goods from outside of approved list of suppliers.Eprocurement ca be thru direct links to major suppliers via direct extranet and buying alliances or buying sites for companies where they post RFPs etc.
Negotiating for better prices is importantFor price pressure solution selling is useful: Soln to enhance customer revenues, decrease customer risks and reduce customer costs
After selecting supplier, final order is negotiated…
Corporate credibility depends on expertise, trustworthiness and likabilityMarket growth for mass-production techniques benefits from mass-media advertisingInformation asymmetry == partnership would generate more profits than if the partner was to invade another firms area, ad agencies have knowledge that clients would have difficulty obtainingBarriers to entry: difficult to enter businessDependence asymmetry: One partner can influence or control the others conduct. Advertising agencies control media accessEconomies of scale : provide same market information to many clients
These relationships have risks and opportunities
Organizational buying = Decision making processEstablish need, then identify/evaluate/choose supplierBusiness market = Few large buyersDemand from business market is derived from consumer market and fluctuates with business cycleBuying center = Decision making unitCharacterized by envtl., organizational, interpersonal and individual factors
Buying process => 8 buyphaseProblem recognition, need description, product specification, supplier search, solicitation, selection, order-routine specification, performance reviewInstitutional markets provide goods/services to people, clientele have no control over service.Govt. organizations = require a lot of paperwork, cost conscious due to public scrutiny Suppliers need
Ch7 Kotler and Keller presentation
ANALYZING BUSINESS MARKETS<br />Chapter 7, Kotler & Keller<br />
Government markets<br />VI) Institutional, Govt. Markets<br />Suppliers bid, contracts go to lowest bids<br />Spending subject to public review<br />Can be nationalistic<br />Cumbersome: Comprehensive bid can be 500-700 pages<br />
Summary<br />Think<br />BUY<br />Decide<br />Organizational buying<br />Decision making process<br />Business market<br />Few large buyers<br />Buying center<br />Decision making unit<br />